Capital and Financial targets Investor DayIain Mackay Group Finance Director

May 2012

1

Forward-looking statements

This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and business of the Group. These forward-looking statements represent the Group’s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially is available in our Annual Report and Accounts 2011. Past performance cannot be relied on as a guide to future performance.

This presentation contains non-GAAP financial information. Reconciliation of non-GAAP financial information to the most directly comparable measures under GAAP are provided in the ‘Reconciliation of reported and underlying profit before tax’ supplement available at www.hsbc.com.

2

Committed to delivering on our financial targets

On track to exceed Basel 3 capital and liquidity requirements

Maintain dividend growth policy and 50% earnings retention

Target upper end of 9.5-10.5% Core Tier 1 capital range in advance of increased capital requirements

Target lower end of 12-15% RoE range in medium term

RoRWA targets to reflect increasing capital requirements

Focus on ‘growth HSBC’ business returns

Deliver at upper end of USD2.5-to-USD3.5 billion of sustainable cost save target

Target 48-52% CER

Capital1

Returns2

Efficiency3

3

Financial strength

Key Metrics 20111 Q1 20121

(1) On a reported basis unless otherwise stated(2) Dividends in respect of the year/quarter

Returns

Efficiency

Capital &

Liquidity

Core Tier 1 Ratio (%)

Dividends (USD per ordinary share)2

ADR (%)

PBT (USDbn)

RoE (%)

RoRWA (%)

CER (%)

Sustainable Saves Achieved (USDbn)

10.1

0.41

75.0

21.9

10.9

1.9

57.5

0.9

10.4

0.09

74.8

4.3

6.4

1.4

63.9

0.3

CER (%) (underlying) 61.0 55.5

1

2

3

4

Capital generation through the cycle

2011 Core Tier 1 Capital

USDbn

Profit2

Core Tier 1 Ratio 9.4

(1) Capital generation is calculated as profit attributable to shareholders excluding changes in fair value on own debt related to credit spread changes (net of tax), less declared dividends net of scrip (2) Profit attributable to shareholders excluding changes in fair value on own debt related to credit spread changes (net of tax)(3) Dividends declared

1.88.7

9.46.3

Q1 2012

116.1106.3

201120102009

1

122.5

Gross Dividends3

Scrip

10.2

5.6

1.7

10.5

13.2

6.4

2.5

10.1

14.0

7.5

2.2

10.4

4.5

2.7

n/a

126.9

Capital Generation1

5

(0.8)(1.1) 0.90.5

10.4

0.1

10.1(0.3)

9.4

10.30.20.2

Basel 3 Q4 20183

8.3

Simulated effect of full Basel 3 rules on HSBC 1Q 2012 Core Tier 1 capital ratio exclusive of future profit or business growth

1

Core/Common Equity Tier 1 Ratio1,2

(1) No capital generation, no business growth included(2) Based on current accounting rules(3) March 2012 position after strategic disposals and certain management actions on expected 2018 regulatory basis

Early implementation: Securitisation at 1250% Reversal of tax credit for

expected losses

Change in treatment for deferred tax assets Items above threshold subject to 250% Risk weight Change in treatment of equity exposures

Threshold deductions Restriction on Minority Interests Pension adjustment requirements Restrictions on deferred tax assets

that rely on future profitability AFS gain/ losses Expected loss change

CVA charge Financial correlation Securitisation Free deliveries

CML portfolio run-off

Sale of US cards and branches

CVA mitigation

CML portfolio run-off

GB&M Legacy run-off

Basel 2.5 1Q 2012

Basel 3 RWA impact

Basel 3 capital impact

Strategic disposals

CVA charge

mitigation

Legacy run-off

Basel 3 Q4 2013

RWA impact (phased in)

Capital impact

(phased in)

Legacyrun-off

30 bps

Management actions and run-offCapital/RWA requirements

6

Transition to Basel 3 Common Equity Tier 1 requirements1

1.9

2.5

2.51.9

1.30.6

1.3

0.62.5

Jan 2019

4.5

Jan 2018

10.2

Jan 2015

4.5

4.5

Jan 2014

4.0

4.0

Jan 2013

3.5

3.5

Jan 2012

2.0

2.0

Jan 2011

2.0

2.0

4.5

8.3

Jan 2017

1.3

4.5

1.9

6.4

Jan 2016

0.6

4.5

12.0

Conservation capital buffer

G-SIB surcharge (1-2.5%)

Core Tier 1 minimum

Countercyclical capital buffer (0-2.5%)

1

Required Core/Common Equity Tier 1 ratio, %

(1) Does not include requirements proposed by UK Independent Commission on Banking or the proposed EU debt write-down requirements (‘bail-in’)

ICB, G-SIB, countercyclical buffer, EU Bail-in requirements

Impacts mitigated by: Run-off of residual legacy

businesses Strong capital generation Five filters discipline Self-funded business growth

Beyond 2013: continued regulatory uncertainty

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50%

15%

Retainedearnings/capital

Variable pay3

Dividends2

35%

Dividends/Earnings usage

2011 pro forma post-tax profits allocation1

1

(1) Attributable profits excluding changes in fair value on own debt related to credit spread changes (net of tax) and before variable pay distributions(2) Inclusive of dividends to holders of other equity instruments and net of scrip issuance (3) Total variable pay pool for 2011 net of tax and portion to be delivered by the award of HSBC shares

50% profit retention Robust subsidiary dividend flow Maintain 40-60% dividend payout ratio Considered levels of variable pay

8

10.99.5

5.1

2009 2010 2011

12 – 15

Target

Lower end of 12-15% RoE expected in the medium term

HSBC return on average ordinary shareholders’ equity

HSBC return on average risk weighted assets (%)

2

1.91.7

0.6

20102009

2.1 – 2.71

Target2011

Percent

Percent

(1) Assuming a core tier 1 ratio of 10.5% (on a transitional Basel 3 basis)

Target returns impacted by evolving regulatory requirements

Returns dependent on degree of market stability

Strategic disposals suppress medium term returns

RoRWA targets reviewed as regulatory requirements evolve

Global Businesses and Regions targeting middle/upper end of RoRWA target ranges in medium term to support 12-15% RoE

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Focus on building returns in growth businesses

2011 Impact of Legacy Businesses on RoRWA

Percentage points

1,210 132 50 42 986RWAs1,USDbn

2

0.6

2.2

1.6

(0.1)0.1

(1) RWAs as at 31 December 2011

Legacy businesses will be managed down robustly

Redeployment of capital within ‘growth HSBC’ to optimise returns

Capture additional growth through Global Business connectivity

Sustainable cost saves through four programmes

Simplification of HSBCGB&M Legacy

Card and Retail

Services (‘CRS’)

2011 RoRWA(excl. changes in own credit

spread)

US run-off

‘GrowthHSBC’

10

224224

1.6

(1.4)

2.2

(7.2)

2.1

2.2

3.9

3.7

1.6

(1.4)

2.2

0.7

2.3

2.6

3.1

5.3

1.1

2011 RoRWA by Geography and Global Business (‘growth HSBC’)

2011 RoRWA1 by Geography

Percent

(1) Excludes USD3.9bn change in fair value on own debt related to credit spread changes (2) RWAs as at December 2011. RWAs are non-additive across geographical regions due to market risk diversification effects within the Group(3) Europe includes the Group’s head office costs, intra HSBC recharges and the total impact of the UK bank levy(4) Main items reported in other are the UK bank levy, unallocated investment activities, and certain property related activities. It also includes net interest earned on free

capital held centrally, operating costs incurred by the head office operations in providing stewardship and central management services to HSBC, and costs incurred by the Group Services Centres and Shared Services Organisations and associated recoveries.

2

Europe3

North America

Latin America

MENA

Rest ofAsia Pacific

Hong Kong

GB&M

CMB

GPB

RBWM106

RWAs2, USDbn

279

59

144

986

102

2011 RoRWA1 by Global Business

Percent

2.1 to 2.7

‘Growth HSBC’

Other4

‘Growth HSBC’

309

Total 1,210

178

22

373

986

383

30

1,210Total

2.1 to 2.7

Run-off and CRS Run-off and CRS

11

0.30.5

0.3

(0.3)

(0.3)

2011 and 1Q 2012 impacted by a number of notable items

Operating Expenses – 4Q 2011 to 1Q 2012

USDbn

3

Net increase Q on Q of USD0.2bn

1Q 12 Expenses

10.4

Other

(0.3)

1Q 12 customer redress

(0.4)

4Q 11 customer redress

1Q 12 restructuring

4Q 11 restructuring

4Q 11 US mortgage

foreclosure & servicing

costs

4Q 11UK bank

levy

4Q 11 Expenses

11.2

(0.6)

1Q 12 sustainable

saves

Net reduction Q on Q of USD0.1bn

12

Quarterly progression in operating expenses and FTE

Operating Expenses1 and FTE

USDbn; FTE

3

1.50.7 0.8

285288294296299

10.4

Q1 2012

11.2

9.7

Q3 2011

9.6

9.4

0.2

Q2 2011

9.8

9.8

(0.0)

Q1 2011

10.1

9.5 9.6

Q4 2011

Notable Items, USDbn2Operating Expenses excl. notable items, USDbnFTE, 000’s

(1) At constant currency(2) Notable cost items are as presented on page 29 on the 2011 Annual Report and Accounts

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Robust revenue base: over 90% of income from reliable revenue streams

Other variable income

Rates and Credit

GPB

BSM

Global Banking

Global Markets(ex Rates and Credit)

CMB NII and NFI

RBWM NII and NFI 48

8

7

6

5

2

5

19

(3)

(20)

3

(42)

n.a.

11

8

9 Reliable Revenue

Variable Revenue

Total Net Operating Income1, 2011 USDbn

Minimum and Maximum 2009 – 2011

% Share Net Operating Income1

3

CAGR %

93

32.3

14.2

6.4

5.4

3.5

3.3

1.7

2009-2011 2009-2011 (average)

72.3

5.5

Total(1) Before loan impairment charges and credit risk provisions

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3

Delivering sustainable cost saves & targeted revenue growth achieves CER in 48-52% range

Operating Expense drivers, USDbn

Operating Income drivers, USDbn

Continuous progress: 48-52% CER…..a KPI

(1) 2011 underlying revenue items of USD4.2bn partly offset by USD1.4bn unfavourable movement on the fair value of non qualifying hedges (NQHs)(2) 2011 revenue/operating expense contribution of Cards and Retail Services only(3) Illustrative effect on future net interest income of an incremental 25 bps parallel rise in all yield curves worldwide at the beginning of each quarter during the 12 months from 1 January 2012(4) Incremental revenues identified for wealth management (USD3.7bn) and Global Business integration (USD1.5bn)

USD41.5

USD72.3 USD(2.8)1 USD(0.5) USD(5.5)2

2011 variability BSM Disposals and run-off

Economic factors

Revenue growth

USD1.63 USD5.24

USD(2.4) USD(1.6-2.6) USD(1.8)2

2011 notable items

Sustainable saves

FVOD NQHs Other

Expected lower annual return of c. USD3.0bn

CRS, US branches

US and GB&M run-off

Policy rates/NII GDP

Wealth management CMB/GBM connectivity Other business growth

Restructuring Customer redress Bank levy Pension credit ..

Target range of USD2.5-3.5 less 2011 saves

Disposals and run-off

CRS, US branches….

US and GB&M run-off

Economic factors

Investment in growth markets

with positive jaws

2011 Net Operating

Income

2011 Operating Expenses

Wage inflation….

15

56

1213

Cost growth focused on growth markets with positive jaws

Underlying Expense and Revenue Growth (2010 to 2011)

Percent

(11)(8)

North AmericaEurope

Developing / Growth markets

Developed markets

Sustained growth with positive jaws in faster growing markets

Latin America

Rest of Asia Pacific

Hong Kong Middle East

Income volatility driving negative jaws

108 7 8

97

Underlying revenue growth

Impact of notable cost items1

CER 63.8% 55.1% 44.5% 45.2%

CER 80.1% 59.3%

5 2 3

58

3

(1) Notable cost items are as presented on page 29 on the 2011 Annual Report and Accounts

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Key messages

On track to exceed Basel 3 capital and liquidity requirements

Maintain dividend growth policy and 50% earnings retention

Target upper end of 9.5-10.5% Core Tier 1 capital range in advance of increased capital requirements

Target lower end of 12-15% RoE range in medium term

RoRWA targets to reflect increasing capital requirements

Focus on ‘growth HSBC’ business returns

Deliver at upper end of USD2.5-to-USD3.5 billion of sustainable cost save target

Target 48-52% CER

Capital1

Returns2

Efficiency3

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Definitions (1/2)

Changes in fair value due to movements in own credit spread on long-term debt issuedFVOD

The metric, return on risk weighted assets (‘RoRWA’), is defined as profit before tax divided by average risk weighted assets (‘RWAs’). RWAs have been calculated using FSA rules for the 2009, 2010 and 2011 metrics. In all cases, RWAs or financial metrics based on RWAs for geographical segments or Global Businesses include associates, are on a third party basis and exclude intra- HSBC exposures.

RoRWA

Capital Generation is defined as profit attributable to shareholders’ of the parent company excluding changes in fair value of own debt related to credit spread changes (net of tax), less dividends declared net of scrip dividends.

Capital Generation

Please refer to the 2011 Annual Report and Accounts for the definition of terms used in this presentation. Set out below, are the definitions of terms not defined in the 2011 Annual Report and Accounts.

Europe geographic segment includes the Group’s head office costs, intra-HSBC recharges and the total impact of the UK bank levy

Europe

‘Other’ contains the full impact of the bank levy, the results of certain property transactions, unallocated investment activities, centrally held investment companies, movements in the fair value of own debt, central support and functional costs with associated recoveries, HSBC’s holding company and financing operations.

Other Global Business

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Definitions (2/2)

Card and Retail Services.CRS

Run-off includes Legacy Credit in GB&M and North America consumer lending and mortgage run-off portfolios.

Run-off

The term ‘Growth HSBC’ is used in an analysis of HSBC’s results, showing the effect of disposals and run-off portfolios separately from the rest of the Group. Refer to the footnotes on slide 21 of the Group Strategy presentation and slide 10 of the Capital and Financial Targets presentation for more details

Growth HSBC

Small markets are markets where HSBC has profitable scale and/or focussed operations, subscale markets foreseen for exit and representative offices.

Small markets

Network markets are further HSBC markets with high relevance for international connectivity.Network markets

Priority growth markets are Australia, Mainland China, India, Indonesia, Malaysia, Singapore, Taiwan, Vietnam, France, Germany Switzerland, Turkey, Egypt, Saudi Arabia, United Arab Emirates, Canada, United States of America, Argentina, Brazil and Mexico.

Priority growth markets

The term ‘Home markets’ refers to our principal existing markets in Hong Kong and the United Kingdom.

Home markets